Citrus County's staid hometown bank, Brannen Banks of Florida, is under attack by a group of minority shareholders. The group, led by Crystal River Realtor and former banker Ed Tolle, alleges that the family-run bank is disbursing unusually low dividends to shareholders while overpaying its two directors, bank president George Brannen II and his brother Joe, a private attorney.
In a lawsuit filed last summer in federal district court, Tolle and five other shareholders seek at least $1-million from the Brannens and their bank for violation of federal securities laws and for running the bank for their own benefit.
While the lawsuit makes a myriad of allegations, the ultimate issue is money.
The Brannens want to redeem as many non-family held shares as possible to head off a potential tax crisis. The question is, how much will Brannen Banks pay to buy out the minority stockholders?
In August 1989, Brannen Banks made a tender offer of $1,450 per share for the 7,655 shares not owned by the Brannen family.
About 1,800 shares were redeemed, according to the lawsuit, increasing the family's holdings from 71 to 80 percent of the company stock.
Tolle, the largest minority shareholder with a 5 percent share, thinks that $1,450 was way below the market value of the stock, which is not publicly traded on any stock exchange.
During the tender offer period, he bought a small number of shares from other stockholders for $1,600 a share.
Neither George nor Joe Brannen returned phone calls Friday. Their attorney, Russell LaPeer, said Tolle has the right to try to get as much as he can for his shares.
But "you don't bring lawsuits to do that," the Ocala lawyer said.
"You don't claim securities fraud, corporate mismanagement and waste of corporate assets by people who have built the soundest bank system in the state of Florida in order to leverage up your position for the sale of your stock."
Joining Tolle in the suit are minority shareholders Edward Gerrits of Crystal River, Robert Henigar of Crystal River, David Arthurs of Inverness, Ervin Davis of Inverness and James Sanders of Homosassa. Together, the others hold about 1 percent of the bank's shares.
No one questions the financial stability of Brannen Banks. Following the conservative philosophy of George Brannen _ founder of the Bank of Inverness in 1926 and father of the two Brannen brothers _ the bank has grown slowly but steadily.
Today, it encompasses the Bank of Inverness, Crystal River Bank, Homosassa Springs Bank, Dunnellon State Bank and the Hernando County Bank.
The failing health of founder George Brannen, who died in March 1990, and his wife Margaret apparently spurred the tender offer that thrust the solid hometown bank into federal court.
"This offer is being made because of Brannen family estate tax planning considerations," the 1989 tender offer reads in part.
"As a result of the redemption of non-family shareholders, the company and the Brannens will have increased flexibility to deal with eventual estate tax problems."
The suit claims the wording of the tender offer contains misleading information, which violates security laws.
Tolle thinks that the Brannen brothers face a tremendous inheritance tax bill.
To pay that bill, they could increase the dividends paid on the company stock, since they collect dividends as shareholders.
But as long as there are outside shareholders, the higher dividends would be disbursed to shareholders such as Tolle as well. Tolle thinks that's why the Brannens want to buy up the non-family stock.
Historically, Brannen Banks has paid the lowest dividends of any comparable bank holding company, the suit alleges. LaPeer disputes that Brannen is the lowest but concedes the dividends are low.
"That's better than a bank that pays high dividends sometimes and no dividends at other times," LaPeer said.
"There are a lot of banks in the peer group of Brannen Banks who aren't paying any dividends and haven't been paying any dividend for some time."
The twice-a-year dividend of Brannen Banks has remained at $2.27 a share since 1985.
At the same time, the salaries of the Brannens have skyrocketed since 1988, according to tax and company records obtained in the suit.
In 1988, George Brannen II's annual wages, bonuses and director's fees rose $200,000 to $372,000.
His father's compensation increased from $150,000 to $285,000. Joe Brannen collected $140,000 from the bank.
In 1989, the two brothers together received $400,000 in bonuses alone, more than twice the total dividends paid to all shareholders that year, according to Tolle.
Who were the directors of the bank who awarded the bonuses? George and Joe Brannen and their father.
"These bonuses and directors fees are extraordinarily high under any circumstances, but they are especially difficult to understand since shareholders have received no increase in dividends since 1985," Tolle said at the Brannen Banks annual shareholders meeting in February.
LaPeer replied that the success of Brannen Banks justifies the salaries. He noted that as George Brannen II's salary rose in 1989, his father's salary declined.
Tax records indicate that the senior Brannen's compensation fell from $285,000 to $165,000.
"Brannen Banks has been much more successful than Southeast (Banking Corp.) and Barnett (Banks Inc.)," he said.
"Its stock has never gone down. It has not suffered any sharp declines. Despite the difference in sizes, Barnett and Southeast would like to be as healthy as Brannen Banks. Do you reward the people who are responsible for this?"
Ultimately, a federal judge may decide that question.
The two sides have until Oct. 28 to collect evidence and depose witnesses.
If the case isn't settled out of court, the case likely will go to trial sometime next year, said Bradley Byrne, the Alabama attorney representing Tolle and the other plaintiffs.